Lavendon reveals reduced interim profits but increased turnover
Lavendon Group, Europe’s largest player in the powered access market, has seen its operating profit fall from £4.9 million for the first half of 2001 to £3.6 million for the first half of this year according to 2002 Interim Results released today. At the same time, group turnover has risen from £39.7 million in the first half of last year to £47.6 million in the first half or this year. Profit before tax is down from £2.5 million to £0.6 million. This compares with total turnover last year of £90.1 million and total operating profit of £14.3 million.
Kevin Appleton, CEO of the Lavendon Group, told Vertikal.net that although the results were down, “they are in-line with analysts expectations”. He added that the substantial investment the company had made in new equipment during 2001 was taking some time to come through as additional revenue and noted that the company was also substantially exposed to the effects of the economic slowdown that had taken place in mainland Europe.
However, Lavendon in general, and Appleton in particular remain convinced that European demand for powered access continues to grow and will at least double in the next 5 to 10 years and could even quadruple. This prediction is based on observation of the mature US market and the impact of new safety legislation in the EU.
“The Group will continue to weather the difficult economic conditions through aggressive cost management, low levels of capital expenditure and a focus on building market share through continued growth in the scale and quality of our customer base” said David Price, Executive Chairman of Lavendon Group.
Total investment during the first half of 2002 has been limited to £6.7 million (compared to £63.6 million last year) and £5.7 million of this has been invested in the rental fleet. €5 million (approximately £3.3 million) has been earmarked for the German fleet.
The UK is Lavendon’s most successful operational area and the active customer base has expanded by 10 per cent to 9920 while “average customer spends [are] up a healthy 7 per cent. Hire rates in the UK are described as “stable”. UK turnover for the first six months of the year reached £28.6 million (2001: £24.9 million) and operating profit was up 6 per cent to £5.4 million. This derives from the Nationwide fleet of approximately 6100 units. In Germany, where Zooom has a fleet of approximately 4100 units, turnover reached £14.1 million but there was an operating loss of £1.6 million in the first half of the year (2001: operating profit of £0.8 million). Turnover from France, Spain and Austria was £3 million while the Group’s Middle East activities contributed £1.9 million.
The total Lavendon Group fleet at 30 June 2002 was 11,500 units says the report which adds that the platforms had an average age of 3.2 years although in Germany the figure drops to less than 2 years.
Looking at the overall fleet the report says that there is “excess capacity” in Lavendon’s fleets, “particularly in our German operation” and says that substantial investment is therefore not currently necessary. It adds that in Germany: “activity levels remain subdued as a result of a generally sluggish economy and average customer spends are down by 10 per cent on the same period last year”. There are, however, indications that companies have postponed much maintenance work says Lavendon and predicts that this cannot be deferred much longer. Average hire rates in Germany are down by 5 per cent but Zooom has increased its active customer base by a phenomenal 25 per cent to 11,320. The report stressed that there are no plans for any reduction in the depot network but reveals that “over 5 per cent of the German fleet” has been redeployed into other territories. At the same time Zooom has “considerably reduced the total headcount and initiated other cost-cutting programmes estimated to realise savings of £1.2 million per annum”. Appleton confirmed to Vertikal.net that the headcount has been “progressively reduced by about 40 or 50 as compared to its peak” but that there are no further plans to reduce numbers: “Anything we were going to do has already been done”.
Appleton added that the recent appointment of a new managing director for Zooom in Germany would not bring any change to the company’s strategy in Germany. He added that “Zooom Germany will certainly become the jewel in our crown within the next few years”.
Finally, the interim report confirmed that the board “had been approached by an intermediary who had informed the Board that it was acting for parties who may be interested in making an offer for the whole of the issued share capital of Lavendon”. The Board revealed that no formal proposal had been received and said that it “continues to view the approach as being very preliminary and uncertain”.